Labor Mobility in Currency Unions

Iván Werning and Emmanuel Farhi

No 75, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We study the effects of labor mobility within a currency union suffering from nominal rigidities. When the demand shortfall in depressed region is mostly internal, migration may not help regional macroeconomic adjustment. When external demand is also at the root of the problem, migration out of depressed regions may produce a positive spillover for stayers. We consider a planning problem and compare its solution to the equilibrium. We find that the equilibrium is generally constrained inefficient, although the welfare losses may be small if the economy suffers mainly from internal demand imbalances.

Date: 2014
New Economics Papers: this item is included in nep-mig and nep-opm
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Citations: View citations in EconPapers (16)

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